March of the Robo-advisors : The potential for global expansion of digital asset management platforms
Rättyä, Jere (2016)
Rättyä, Jere
Metropolia Ammattikorkeakoulu
2016
All rights reserved
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2016101315138
https://urn.fi/URN:NBN:fi:amk-2016101315138
Tiivistelmä
This thesis looks into the robo-advisory market in the U.S. and Europe, with the goal of determining the international potential for a Finnish robo-advisor service and inspecting the interest of foreign service providers in the Finnish market. Fintech is becoming increasingly disruptive for the traditional and conservative financial sector, which has resulted in start-ups building their own robo-advisor platform around the world.
Traditional wealth management is both expensive and exclusive. Automated wealth management in the form of robo-advisors seeks to change this and bring wealth management to the masses at an affordable price. In the U.S. robo-advisors have become a formidable trend, having started out in Silicon Valley and expanded across the country. In Europe the players are smaller, but growing and expanding fast.
The regulation in Europe is headed in a direction that enables more mobility in the member states of the EU and ETA. With MiFID already in force and MiFID II on the way, Europe is clearly headed towards a more flexible and open environment that allows competition across state borders.
An important question regarding robo-advisors is whether or not potential customers will actually choose a platform based on an algorithm over a human advisor. The main advantage of a human advisor over a robo-advisor is customizability of your portfolio and a shoulder to lean on when in doubt. A robo-advisor offers a portfolio at a fraction of the cost, but leaves almost all responsibility on the customer. This can be risky, because we as humans tend to overreact to negative news concerning our portfolio and earnings.
Overall, growth in the robo-advisory industry has been significant, especially in the U.S., and Europe is also seeing companies that are gaining market share and expanding across state borders. With regulations catching up to the desires of the market, robo-advisors will be gaining more freedom and market share in Europe as well.
The Nordic financial markets are lagging behind in this respect, with only a limited offering of robo-advisor services. Sweden is the most advanced with two platforms, one of which is due to launch in autumn of 2016. It is likely that if a robo-advisor expands to Finland, it will be one of these two. When it comes to seeking out fertile ground for a Finnish platform, Estonia would seem to be a good alternative due to their tech-oriented nature and relatively unsaturated market in digital advisory services.
Traditional wealth management is both expensive and exclusive. Automated wealth management in the form of robo-advisors seeks to change this and bring wealth management to the masses at an affordable price. In the U.S. robo-advisors have become a formidable trend, having started out in Silicon Valley and expanded across the country. In Europe the players are smaller, but growing and expanding fast.
The regulation in Europe is headed in a direction that enables more mobility in the member states of the EU and ETA. With MiFID already in force and MiFID II on the way, Europe is clearly headed towards a more flexible and open environment that allows competition across state borders.
An important question regarding robo-advisors is whether or not potential customers will actually choose a platform based on an algorithm over a human advisor. The main advantage of a human advisor over a robo-advisor is customizability of your portfolio and a shoulder to lean on when in doubt. A robo-advisor offers a portfolio at a fraction of the cost, but leaves almost all responsibility on the customer. This can be risky, because we as humans tend to overreact to negative news concerning our portfolio and earnings.
Overall, growth in the robo-advisory industry has been significant, especially in the U.S., and Europe is also seeing companies that are gaining market share and expanding across state borders. With regulations catching up to the desires of the market, robo-advisors will be gaining more freedom and market share in Europe as well.
The Nordic financial markets are lagging behind in this respect, with only a limited offering of robo-advisor services. Sweden is the most advanced with two platforms, one of which is due to launch in autumn of 2016. It is likely that if a robo-advisor expands to Finland, it will be one of these two. When it comes to seeking out fertile ground for a Finnish platform, Estonia would seem to be a good alternative due to their tech-oriented nature and relatively unsaturated market in digital advisory services.